§ 1757a. — Limitation on member business loans.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1757a]
TITLE 12--BANKS AND BANKING
CHAPTER 14--FEDERAL CREDIT UNIONS
SUBCHAPTER I--GENERAL PROVISIONS
Sec. 1757a. Limitation on member business loans
(a) In general
On and after August 7, 1998, no insured credit union may make any
member business loan that would result in a total amount of such loans
outstanding at that credit union at any one time equal to more than the
lesser of--
(1) 1.75 times the actual net worth of the credit union; or
(2) 1.75 times the minimum net worth required under section
1790d(c)(1)(A) of this title for a credit union to be well
capitalized.
(b) Exceptions
Subsection (a) of this section does not apply in the case of--
(1) an insured credit union chartered for the purpose of making,
or that has a history of primarily making, member business loans to
its members, as determined by the Board; or
(2) an insured credit union that--
(A) serves predominantly low-income members, as defined by
the Board; or
(B) is a community development financial institution, as
defined in section 4702 of this title.
(c) Definitions
As used in this section--
(1) the term ``member business loan''--
(A) means any loan, line of credit, or letter of credit, the
proceeds of which will be used for a commercial, corporate or
other business investment property or venture, or agricultural
purpose; and
(B) does not include an extension of credit--
(i) that is fully secured by a lien on a 1- to 4-family
dwelling that is the primary residence of a member;
(ii) that is fully secured by shares in the credit union
making the extension of credit or deposits in other
financial institutions;
(iii) that is described in subparagraph (A), if it was
made to a borrower or an associated member that has a total
of all such extensions of credit in an amount equal to less
than $50,000;
(iv) the repayment of which is fully insured or fully
guaranteed by, or where there is an advance commitment to
purchase in full by, any agency of the Federal Government or
of a State, or any political subdivision thereof; or
(v) that is granted by a corporate credit union (as that
term is defined by the Board) to another credit union.
(2) the term ``net worth''--
(A) with respect to any insured credit union, means the
credit union's retained earnings balance, as determined under
generally accepted accounting principles; and
(B) with respect to a credit union that serves predominantly
low-income members, as defined by the Board, includes secondary
capital accounts that are--
(i) uninsured; and
(ii) subordinate to all other claims against the credit
union, including the claims of creditors, shareholders, and
the Fund; and
(3) the term ``associated member'' means any member having a
shared ownership, investment, or other pecuniary interest in a
business or commercial endeavor with the borrower.
(d) Effect on existing loans
An insured credit union that has, on August 7, 1998, a total amount
of outstanding member business loans that exceeds the amount permitted
under subsection (a) of this section shall, not later than 3 years after
August 7, 1998, reduce the total amount of outstanding member business
loans to an amount that is not greater than the amount permitted under
subsection (a) of this section.
(e) Consultation and cooperation with State credit union supervisors
In implementing this section, the Board shall consult and seek to
work cooperatively with State officials having jurisdiction over State-
chartered insured credit unions.
(June 26, 1934, ch. 750, title I, Sec. 107A, as added Pub. L. 105-219,
title II, Sec. 203(a), Aug. 7, 1998, 112 Stat. 920.)
Study and Report
Pub. L. 105-219, title II, Sec. 203(b), Aug. 7, 1998, 112 Stat. 922,
provided that:
``(1) Study.--The Secretary [of the Treasury] shall conduct a study
of member business lending by insured credit unions, including--
``(A) an examination of member business lending over $500,000
and under $50,000, and a breakdown of the types and sizes of
businesses that receive member business loans;
``(B) a review of the effectiveness and enforcement of
regulations applicable to insured credit union member business
lending;
``(C) whether member business lending by insured credit unions
could affect the safety and soundness of insured credit unions or
the National Credit Union Share Insurance Fund;
``(D) the extent to which member business lending by insured
credit unions helps to meet financial services needs of low- and
moderate-income individuals within the field of membership of
insured credit unions;
``(E) whether insured credit unions that engage in member
business lending have a competitive advantage over other insured
depository institutions, and if any such advantage could affect the
viability and profitability of such other insured depository
institutions; and
``(F) the effect of enactment of this Act [see Short Title of
1998 Amendment note set out under section 1751 of this title] on the
number of insured credit unions involved in member business lending
and the overall amount of commercial lending.
``(2) NCUA cooperation.--The National Credit Union Administration
shall, upon request, provide such information as the Secretary may
require to conduct the study required under paragraph (1).
``(3) Report.--Not later than 12 months after the date of enactment
of this Act [Aug. 7, 1998], the Secretary shall submit a report to the
Congress on the results of the study conducted under paragraph (1).''
Section Referred to in Other Sections
This section is referred to in section 1790d of this title.
